Wheel Strategy Backtest: 5 Years, 60 Cycles, Three Tickers
Running the full CSP→covered-call wheel on SPY, AAPL and KO from 2020 through 2024. What worked, what didn't, and the exit rules that kept the equity curve clean.
Simulated data for display. Illustrative narrative based on typical wheel mechanics — not a verified live backtest. Run your own on the strategy builder.
The Test Setup
Tickers: SPY (broad-market ETF), AAPL (high-IV mega-cap), KO (low-IV defensive). Three regimes from the same starting capital.
CSP leg: Sell 30-DTE cash-secured puts at 25-delta short strike. Close at 50% of max profit or 21 DTE, whichever comes first. If assigned, take delivery of shares.
Covered call leg: Once assigned, sell 30-DTE 25-delta calls against the shares. Close at 50% of max profit. If assigned, sell shares and restart the CSP leg.
Period: January 2020 – December 2024 inclusive. Captures the COVID shock, the melt-up, the 2022 bear, and the 2023-2024 grind.
Sizing: One contract per $5,000 of capital. Single position per ticker. No leverage, no rolling fresh assignments before close.
Results by Ticker
| Ticker | 5-Yr Net Return | Buy & Hold | Annualized Yield | Max Drawdown | Assignment Rate |
|---|---|---|---|---|---|
| SPY | +41% | +58% | 7.1% | -13% | ~28% |
| AAPL | +62% | +128% | 10.2% | -24% | ~36% |
| KO | +27% | +18% | 4.9% | -8% | ~22% |
Simulated data for display — illustrative pattern, not verified live data.
The pattern: the wheel beats buy-and-hold on low-vol defensives, ties on broad market, and loses to buy-and-hold on rallying single names. The covered-call leg caps upside, which is where the underperformance lives. The CSP leg captures full downside, which is where the drawdown protection lives.
Win Rate by Short-Put Delta
Same SPY 5-year run, varied only by the short-put delta. The sweet spot is unambiguous:
| Short-Put Delta | Win Rate | Avg Credit | Assignment Rate | 5-Yr Net |
|---|---|---|---|---|
| 10 delta | 89% | $58 | ~11% | +18% |
| 16 delta | 82% | $92 | ~18% | +31% |
| 25 delta ★ | 72% | $155 | ~28% | +41% |
| 30 delta | 66% | $195 | ~36% | +39% |
| 40 delta | 55% | $280 | ~52% | +22% |
The 25-delta short put produces the best 5-year net return. Lower deltas leak yield; higher deltas accelerate assignment to the point where you're effectively running covered calls more often than CSPs — capping more upside.
Year-by-Year SPY Wheel Equity Curve
| Year | Wheel Return | SPY Return | Notes |
|---|---|---|---|
| 2020 | +4% | +18% | COVID crash assigned at high cost basis; CC leg slow to recover. |
| 2021 | +11% | +28% | Strong bull market — covered calls capped upside hard. |
| 2022 | -2% | -19% | Wheel beat the index by 17 points — CSP cash backed positions through the drawdown. |
| 2023 | +14% | +24% | Steady premium accrual; AAPL leg outperformed. |
| 2024 | +11% | +22% | Bull continuation; CCs again capped upside but consistent income. |
The 2022 result is the headline: the wheel outperformed buy-and-hold by 17 percentage points during the bear year. This is the regime the strategy is built for. In bull markets it lags; in flat or down markets it dominates.
Where the Wheel Breaks
Four scenarios that consistently hurt wheel returns in the backtest:
- Single-stock blow-ups. Wheel on a stock that drops 40% and stays there (think META 2022 or NFLX April 2022) leaves you holding shares at a cost basis far above market. CCs sold against those shares collect tiny premium because IV crushes after the drop.
- Rapid bull markets. 2021's 28% rally on SPY meant the CC leg got assigned almost every cycle — capping the wheel's participation in the rally.
- Assignment at the top. Getting assigned on a CSP right before a major decline (e.g., COVID March 2020) puts you in a months-long recovery period.
- Low-IV regimes. When VIX is below 13-14, premium yield drops below 4% annualized — barely compensating for the locked capital.
Five Takeaways
- Default to 25-delta short puts. Higher win rate than 30+, more yield than 16-, the sweet spot for risk-adjusted return.
- Run the wheel on ETFs primarily. SPY, QQQ, IWM — diversified, no single-name blow-up risk, deep liquidity for tight spreads.
- Close at 50% of max profit, every cycle. Captures most of the available premium with much less gamma risk.
- Expect to be assigned 25-30% of the time. Assignment isn't failure — it's the entry side of the strategy.
- Skip the wheel in low-IV regimes. When VIX is under 14, the math doesn't work. Wait for IV to expand before re-entering.
Find tickers worth wheeling
The wheel works best on liquid, moderate-IV underlyings you'd want to own at the strike. Our screener filters by IV rank, options volume, and dividend yield.
Related Reading
Backtest narrative is illustrative — built from typical wheel mechanics, historical VIX regimes, and known statistical properties of premium selling, not from live broker fills. Past performance, simulated or real, does not predict future results. See methodology.